Cafe hostages Tori Johnson and Katrina Dawson were reportedly shot by Man Haron Monis moments before police stormed the shop and killed the gunman in a hail of gunfire.
Mr Johnson was shot by Monis at close range, according to the Nine Network, while News Corp Australia reports Ms Dawson was struck in the body by the self-proclaimed Islamic cleric who had held them and 15 others hostage in the Lindt cafe in central Sydney for more than 16 hours.
It's believed Monis opened fire at the pair after a group of hostages escaped the Martin Place cafe at around 2am on Tuesday after he told them they would be "dead in the morning".
As more details of the siege came out on Wednesday, authorities were under increasing pressure to explain how Monis, a man with a long criminal history and links to extremism fell off watchlists and was granted bail.
Prime Minister Tony Abbott said an urgent and wide-ranging review would also examine how the man who was facing charges of being an accessory to the murder of his former wife was granted asylum, citizenship and welfare benefits.
"We particularly need to know how someone with such a long record of violence, such a long record of mental instability was out on bail after his involvement in a particularly horrific crime," Mr Abbott said in Canberra.
"And we do need to know why he seems to have fallen off our security agencies' watch list, back in about 2009."
Mr Abbott said there were questions to be asked when someone with such a history of infatuation with extremism, violent crime and mental instability should be in possession of a gun licence.
Court documents from 2011 reveal Monis had a gun licence while working as a security officer but it had expired.
But NSW Police on Wednesday said there's no record of Monis having held a firearms licence.
The prime minister's comments came on another emotional day in Martin Place, where the family of cafe manager Mr Johnson visited the makeshift shrine that has become an ever-growing technicolour sea of flowers in tribute.
"This love comes for free," Ken Johnson, father of the 34-year-old, said at the shrine.
"We want to thank everybody for supporting us through this terrible time."
Ms Dawson's brother and his family also visited the shrine to place flowers for the mother of three.
Roma Herat, the mother of hostage Joel Herat, on Wednesday said her son had told her he was certain he would be killed if he did not run.
It was 2am, and Monis had told them death would come in the morning.
"Joel said to us `Mum, if we didn't get out now, we were going to die'. The terrorist said to them it will be in the morning. And they said, `no, we're going to get out now'."
When Monis turned his back, they smashed a lock off a door and made a run for it.
It was at that point, too, that shots rang out, and police stormed the cafe.
In Canberra, Mr Abbott in announcing the review, said it was important to have fast answers "so that any lessons can be put into place as quickly as possible".
Monis, 50, had been on an ASIO watchlist in 2008 when he sent offensive letters to the families of dead Australian soldiers, but dropped off the list.
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